As 2018 looms into sight, what key trends will shape the coming year and how can you position yourself to capitalise on them? 2017 was a tumultuous year for the re/insurance industry and it still has 3 weeks left to run. So, which re/insurance themes will carry over into 2018 and how is the industry positioning itself?
1. Cyber: software is eating the world
With the relentless invasion of software into every aspect of our lives, businesses, governments and consumers want to cover their cyber risks through comprehensive re/insurance policies. The issue is that the pervasiveness of software exposes many more lines of re/insurance to cyber risk than is first apparent. How then can the re/insurance industry be more dynamic in understanding and pricing these aggressive and fast evolving risks in a timely and efficient manner?
PCS made an important step in September by launching a Global Cyber Index to provide industry loss estimates for international cyber events. The creation of the index is the first step to developing cyber focussed Insurance Linked Securities (ILS) products.
2. Alternative Capital will continue to be important to the re/insurance market
Although the 2017 hurricane season is projected to be the costliest in US history, the demand from capital markets for re/insurance risks is unlikely to diminish. Trapped collateral and ILS losses may put off some existing investors but new investors looking for uncorrelated returns will continue to enter the marketplace.
With around $30bn of outstanding catastrophe bonds and ILS, 2017 saw historic levels of catastrophe bond issuance. This has encouraged the UK government to support the growing market by approving new Risk Transformation and Tax Regulations last week. The impact of these regulations will be fully tested in 2018, but as the market grows, increased transparency and the ability to trade ILS products on a secondary market will be aided by the appearance of electronic marketplaces.
3. Technology developments will continue to improve the re/insurance industry
The pace of innovation and change, driven by technology, across the re/insurance industry has gathered momentum in 2017. At AkinovA, we continue to work with a number of the leading re/insurance market participants to build an independent third-party marketplace for the transfer and trading of risk.
As the festive season begins and 1st January renewals draw ever closer we wish everyone the best in their endeavours for 2018 and we look forward to working with as many of you as possible in the New Year.